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The examiners reviewed files drawn from the category of Closed Claims for the period July 1, 2002 through June 30, 2003, commonly referred to as the "review period". The examiners reviewed 149 Union Fidelity Life claim files. The examiners cited 44 claims handling violations of the Fair Claims Settlement Practices Regulations and/or California Insurance Code Section 790.03 within the scope of this report. Further details with respect to the files reviewed and alleged violations are provided in the following tables and summaries.


The following is a brief summary of the criticisms that were developed during the course of this examination related to the violations alleged in this report. This report contains only alleged violations of Section 790.03 and Title 10, California Code of Regulations, Section 2695 et al. In response to each criticism, the Company is required to identify remedial or corrective action that has been or will be taken to correct the deficiency. Regardless of the remedial actions taken or proposed by the Company, it is the Company's obligation to ensure that compliance is achieved. Money recovered within the scope of this report was $1,958.92. Following the findings of the examination, a closed claim survey conducted by the Company resulted in additional payments of $208.03. As a result of the examination, the total amount of money returned to claimants within the scope of this report was $2,166.95.

1. The Company failed to provide the written basis for the denial of the claim. In 17 instances, the Company failed to provide the written basis for the denial of the claim. Specifically, the Company's Explanation of Benefits does not refer to the policy provision that supports a partial or full denial of the claim. The Department alleges these acts are in violation of CCR §2695.7(b)(1).

Summary of Company Response: Union Fidelity Life will modify its Explanation of Benefits to include the following statement: "Benefits were processed in accordance with the provisions, conditions or exclusions contained in your policy. Please refer to these sections for covered services or benefit limits." The Company will specify the section of the policy appropriate to the denial of the claim.

2. The Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In nine instances, the Company failed to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear. In seven of the instances, the Department alleges an inconsistency in the Company's adherence to its procedure for payment of the Return of Premium Benefit within the Group Specified Disease category. The Return of Premium Benefit Rider allows a return of 10 years of premium following the certificate's tenth anniversary when specified conditions are met. In these specific instances, the Company's payment of the return premium varied between 21 days to 448 days following the trigger date in the tenth year. In the two remaining instances, the Company failed to refund the unearned premium to which a beneficiary is entitled under the provisions of the Group Credit Life policy. The Department alleges these acts are in violation of CIC §790.03 (h)(5).

1. Upon the Company's receipt of any California death claim, an unearned premium refund is requested in writing by the Claims Department directly. Prior to the implementation of this procedure, the Company had relied upon a refund request from the insured's creditor.

2. The refund of unearned premium has been added to internal audit procedures.

3. The Company failed to record claim data in the file. In five instances, the Company failed to record the date the Company received every relevant document in the file. Specifically in these instances, the Company failed to record the date it received the dental claim form. The Department alleges these acts are in violation of CCR §2695.3(b)(2).

4. The Company failed to advise the claimant that he or she may have the claim denial reviewed by the California Department of Insurance. In four instances, the Company failed to include a statement in its claim denial that, if the claimant believes the claim has been wrongfully denied or rejected, he or she may have the matter reviewed by the California Department of Insurance. The Department alleges these acts are in violation of CCR §2695.7(b)(3).

Summary of Company Response: The Company agrees that in these instances, it inadvertently omitted the required reference to the California Department of Insurance. The Company's procedure is to reference the California Department of Insurance on every denial. The required information is automatically printed on the Explanation of Benefits. The Company reiterated its procedure to include the proper denial language in customized denial letters. To ensure compliance, the Company will review this process with its Claim Associates.

5. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims. In four instances, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. In two instances, one in Group Credit Disability and the other in Individual Life, the Company failed to follow up on outstanding issues in order that the claim could be moved to a conclusion. In the two remaining instances, the Company placed the burden of investigation upon the insured. Specifically, in the Group Health category, the Company directed the insured to obtain medical records on behalf of the Company. The Department alleges these acts are in violation of CIC §790.03 (h)(3).

Summary of Company Response: The Company agrees that two delays in processing occurred but disagrees in one of the instances that the error was committed with such frequency as to indicate a general business practice. Nonetheless, the manager of the Group Credit staff has discussed the circumstances of the impacted claim with the Credit Examiner Staff in September 2003 in order to readdress processing guidelines and the importance of timely follow-up. Additionally, timeliness in investigation and processing, as well as the requirement of sharing periodic status with the insured is formally addressed, annually, by way of a California Fair Claims Practices Course, the completion of which is a job requirement.

6. The Company failed to properly document claim files. In two instances, the Company's files failed to contain all documents, notes and work papers. Specifically, the Company failed to retain copies of all dental claim forms. The Department alleges these acts are in violation of CCR §2695.3(a).

Summary of Company Response: It is the Company's procedure to retain all claim forms. The Company will issue a training memorandum indicating the importance of retaining any and all documents pertaining to any claim.

7. The Company failed to maintain a copy of the certification required by CCR §2695.6(b)(1), (2) or (3) at the principal place of business. In two instances, the Company failed to maintain a copy of the certification required by §2695.6(b)(1), (2) or (3) at the principal place of business. The Department alleges these acts are in violation of CCR §2695.6(b)(4)

8. The Company failed to respond to communications within 15 calendar days. In one instance, the Company failed to respond to communications within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(b).

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